From the case study, it is highlighted that a new trend has emerged amongst small distributors to stock only the fastest-moving lines and often Yee Wos representatives are increasingly being called on to supply less popular lines at very short notice. This makes planning difficult. What can Johnny Tan do to revitalise his distribution channel in order to improve sales of the less popular lines?

(10 marks)

case study:

Yee Wo Plastic Piping Components Ltd

Johnny Tan is the sales manager for Yee Wo Plastic Piping Components Ltd, a subsidiary of a Taiwanese multinational that manufactures a large range of diverse products. Its markets are mainly in the civil and chemical engineering industries.

Yee Wo Plastic Piping Components is solely involved in the manufacture and sale of plastic pumps, valves, fittings, pipes and gauges. Such products have applications in, for example, chemical plants, dye houses and swimming baths. Their growth in the marketplace is virtually assured because they are largely replacing steel and malleable cast iron products at less cost and with greater efficiency.

In the ASEAN region, five manufacturers market similar products. The two largest are Yee Wo Plastic Piping Components and Shun Tak Fittings, each with about 40 per cent of the ASEAN market, with the remaining 20 per cent being shared among the other three. Each of the five manufacturers charges around the same price for its products, but the smaller companies are more prone to negotiation downwards on the factory price.

Distribution is almost wholly through stockists and the sales representatives tasks are twofold:

1. To persuade stockists to hold a full range of the companys products to ensure a complete service to the end-user.

2. To persuade end-users to specify the companys products when purchasing from distributors.

Only Yee Wo Plastic Piping Components and Shun Tak Fittings provide a complete product range and this probably accounts for their success. However, a disturbing trend has emerged among the smaller distributors, and this has been to stock only the fastest moving lines from marginally cheaper sources from smaller manufacturers. Yee Wos representatives are increasingly being called on to supply less popular lines at very short notice. Several of Yee Wos representatives have become disturbed by this trend and two have recently resigned because of the adverse effects on their sales commission. Replacing these with the right calibre of people will be difficult and Johnny Tan realises that there are three courses of action to help solve this problem:

restrict supplies to licensed distributors only;

persuade representatives to concentrate more on the productive market sectors (e.g. large chemical plants); and

sell direct and cut out distributors.